More on Electric Car Charging Stations – for Community Associations

A reader of  my post here sent me an e-mail message raising concerns about whether installing charging stations could make a community association an unlicensed electric power re-seller.  The reader raised an important issue.  As renewable/green energy infrastructure develops, so will statutes and regulations pertaining to it.  Any association interested in such things as electric vehicle charging stations or solar energy will want to be particularly sure to consult with legal counsel to ensure that contracts for such improvements address these evolving legal issues.   

 Specifically regarding electric vehicle charging stations in California, as part of its efforts to implement recently enacted Senate Bill 626 (requiring the PUC to develop policies to develop infrastructure for plug-in hybrid and electric vehicles) the California Public Utilities Commission (CPUC) very recently issued a decision that companies which sell electric vehicle charging services will not be regulated as public utilities pursuant to the Public Utilities Code and that, unless the charging station provider procures electricity on the wholesale market, utility sales of electricity to electric vehicle service providers do not constitute a “sale for resale” under the Federal Power Act.  In fact, the CPUC decision states, as a Conclusion of Law, that “condominium associations that provide electric vehicle charging on the premises as a service to the condominium owners . . . that have not dedicated their equipment to public use” are also not public utilities.  Notwithstanding this, the CPUC does, of course, have authority to dictate the terms under which the utility providing the electricity to power the charging stations provides service, so regulations requiring, for example, that customers notify a utility of anticipated increased connected load would need to be followed.  Again, it will be important for community associations installing charging stations to consult with legal counsel to address these issues during the contracting stage.

 With respect to rates, since the CPUC has decided that electric vehicle charging service providers will not be regulated as public utilities it will not be directly regulating the rates charged to use charging stations.  Insofar as the cost to purchase the electricity to power the charging station is regulated by the CPUC, however, and will be the largest business expense for the charging station’s owner (whether the association or a third party), the CPUC’s decisions regarding tariff rates will, of course, have an indirect impact.     

Failure to understand and address these sorts of regulatory issues can really throw a monkey wrench into the works of what should be a successful effort to “green” a community.  For example, earlier this year it was reported in local (Los Angeles area) media that a $25 million “solar farm” installed in the vast campus parking lots of a community college were sitting “unplugged”.  The solar equipment, owned by a third party, was intended to supply electricity to the Los Angeles Community College District via a Power Purchase Agreement (PPA), but the Los Angeles Department of Water and Power (DWP) would not agree to the arrangement, since the Los Angeles city charter bars the sale of power by any entity other than the DWP.  (This differs from state law pertaining to investor-owned utilities, which generally do approve PPAs).  Last I heard the LACCD was working on another financing arrangement, but these issues would, of course, have been more easily (and, I am sure, more cost effectively) addressed before the solar system was installed, not after.

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Solar Energy for Community Associations – Funding

If you have volunteered for (or been assigned) the task of arranging for the installation of a solar alternative/renewable energy system for a California community association, you are a trailblazer.  That is because, with the exception of new construction and MASH (Multifamily Affordable Solar Housing) Program projects, I am not aware of any community association solar power installations having been completed in California to date.  If I have anything to do with it, however, there will soon be several under development. 

The first step a community association must take in order to obtain its own solar energy system is, of course, to determine how the purchase, installation, maintenance and monitoring of the system will be funded.  As discussed below, multi-unit residential communities which are community associations face particular issues when it comes to funding such a project.  I strongly believe, however, that we have reached a “tipping point” here in California at which these issues can be overcome. 

 The good news is that solar energy systems for multi-unit residential projects here in the United States have, indeed, been successfully funded.  For example, a 1,200 unit apartment co-op recently installed solar panels atop an older 20-story building in Manhattan, to become the largest multi-family residential solar array in New York City.  You can read about the project here.  With respect to funding the project, however, the story notes that the community, Kips Bay Towers, received financial incentives both in the form of a 50% rebate from the State of New York, and via tax credits, neither of which are available for non-profit community associations here in California. 

 Here in Southern California, our state’s first solar-powered apartment community was completed in 2007.  Solara is comprised of 56 fully solar-powered apartments.  As with Kips Bay Towers, however, funding for the project came from a variety of sources which are generally not available to community associations (again, unless they qualify as affordable housing).         

In contrast, Canada encourages all condos and co-ops (not just those qualifying as affordable housing) to install renewable energy projects via government incentives which include grants in addition to tax credits and rebates.  Federal and local government assistance to subsidize the cost of feasibility studies is also provided.  And, in general, Canadian government incentives in the form of rebates for installation costs to encourage alternative/renewable energy projects for industrial, commercial and institutional buildings (schools and hospitals) are made equally available to MURBs (multi-unit residential buildings).  Not so in the United States, unfortunately.  Here, neither the incentives offered to single family residential consumers nor those offered to commercial building owners are of any assistance to community associations, since they are all tax credit based.  In fact, the American Recovery and Reinvestment Act of 2009, which gives the Treasury Department the power to make grant payments in lieu of tax credits to persons and entities putting “specified energy properties” in place, specifically excludes tax exempt organizations from its purview (in fact, the involvement of a tax exempt entity as a partner eliminates eligibility for the payment).   

In addition, community associations in California face funding barriers in their own governing documents and by statute (the provisions of the Davis-Stirling Act).  A capital expenditure of the magnitude required for a community association to fund the installation of a solar system of sufficient size to be financially viable would require a special assessment, a loan, or both, and membership approval of both the installation of the solar system and the special assessment or loan.

There are funding alternatives to address all of the issues described above.  They are either a Power Purchase Agreement (PPA) or a lease.  With a PPA, a separate entity finances the installation of the solar system, maintains and operates it, and sells the electricity it generates to the property owner (in this case, the community association) at negotiated rates.  A lease is similar, but more suited to a smaller project, in which the association would lease the system from the third party system owner (the financing entity).  Under either funding model, membership approval would be required, because either would require a long term contract (15-25 years).  There would be relatively minimal up-front costs (a feasibility study and legal costs to negotiate the contract), and the long-term nature of the contract would provide a substantial benefit to the association and its members, stabilizing an operating cost which would otherwise be unpredictable, and fixing electricity costs by agreement as a hedge against rising utility tariff rates.  The incentive for the third party purchaser/owner of the system is the ability to take advantage of the tax incentives, including credits and accelerated depreciation allowances, which the association cannot make use of, and the certainty that, unlike the owner of a commercial building, barring a cataclysmic event the community association is guaranteed to continue to exist for the duration of the contract.  

Some single family residential solar installers are offering PPAs and leases to their customers.  That is not what I am talking about here, though.  (And that brings me to another, related, topic.  If you have been trying to find a residential solar installer for a common area energy system for your community association, stop.  A community association’s system is going to need the size, scope and sophistication of a commercial solar installer.  It is more likely that a solar installer with commercial project experience will be willing and able to participate in a PPA, as well.)  I am talking about a contract like the PPAs used to fund the installation and operation of solar power systems for large commercial and institutional (hospitals, schools) complexes.     

So, are there third party investors who are interested in funding solar power installations for community associations?  Until fairly recently I was not sure, so focused my attention on smaller commercial PPAs and took a wait and see attitude.  Every so often over the past year and a half or so I would revisit the issue to see if I could generate interest in funding for community associations, and there were some nibbles here and there.  Then, about a month ago, Governor Schwarzenegger signed AB 920, which requires utilities to roll over net metering credits or pay for excess power consumption, into law effective January 1, 2011, and the interest level increased a bit.  I have also heard through the grapevine that a national bank expects to announce its own funding program for community associations next Spring (I am told to expect the “launch date” to be in March 2010).  Based on all of this, I believe that now is the time for community associations interested in solar power for common area consumption to pursue it.

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